One of America's biggest banks has been hit with more than $1.2 billion in regulatory penalties after US authorities uncovered serious failures in its systems for detecting money laundering and other illegal financial activities. Bank of America failed to properly report suspicious transactions exceeding $5 billion, exposing weaknesses in its internal controls and raising concerns over potential national security risks.
The US Treasury Department announced the enforcement action on October 13, describing it as the third-largest penalty in its history. The action also includes the largest fine ever imposed by the Office of the Comptroller of the Currency (OCC), the country's banking regulator.
According to US regulators, Bank of America's anti-money laundering monitoring systems failed to identify and report potentially illegal transactions, despite repeated warnings about deficiencies in its compliance operations.
The Treasury Department identified several serious lapses:
Suspicious transactions: More than $5 billion in suspicious financial activity was not adequately reported to the authorities.
National security risks: Over $1 billion of these transactions involved potential national security and priority illicit finance risks.
Chinese money laundering networks: The bank failed to adequately detect or report transactions potentially connected to Chinese money laundering operations.
Border-related financial crimes: Regulators identified suspected trade-based money laundering activity linked to the southwestern US border.
Weak internal monitoring: The bank depended heavily on alerts from law enforcement agencies and other financial institutions rather than proactively identifying suspicious transactions through its own systems.
The Treasury said the bank's dependence on outside information meant it had effectively transferred a significant portion of its financial crime detection responsibilities to third parties.
The enforcement action involves three regulatory authorities under the US Treasury Department. Bank of America admitted in its settlement with FinCEN that it had wilfully violated the US Bank Secrecy Act.
The violations included failing to maintain a compliant anti-money laundering programme, conduct required due diligence on foreign correspondent banking accounts and submit mandatory suspicious activity reports.
The investigation also found compliance failures involving international sanctions. According to OFAC, Bank of America was involved in 475 apparent violations of US sanctions programmes covering Russia, Iran, narcotics trafficking and global terrorism, among other areas.
The regulator found that the bank processed transactions involving restricted entities and individuals because of weaknesses in sanctions screening, technical errors and inadequate compliance procedures.
The OCC said Bank of America's transaction monitoring system had failed to properly scrutinise trillions of dollars in transactions. Investigators also identified weaknesses in staff training, compliance expertise and internal auditing.
The bank had already been directed to improve its anti-money laundering framework under a regulatory order issued in December 2024. However, the OCC found that significant deficiencies remained unresolved.
The latest penalties reflect regulators' concerns that shortcomings at a major global bank could expose the broader financial system to illicit financial activities.
The action against Bank of America highlights the financial and regulatory risks that major lenders face when their internal compliance systems fail to keep pace with complex international transactions.
Banks operating across multiple jurisdictions are required to monitor financial flows, identify suspicious transactions and comply with sanctions imposed by governments.
For Bank of America, the immediate impact will be a substantial earnings charge. The longer-term challenge will be restoring regulatory confidence by demonstrating that its anti-money laundering and sanctions monitoring systems can effectively detect and report financial crime.